ACF Finco I, LP v. Taylor Meta. (In re Red Ros. )

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In re: RED ROSE, INC., et al., Debtors.

ACF FINCO I, LP, Plaintiff, v. TAYLOR METAL, INC. d/b/a TAYLOR METAL PRODUCTS, Defendant.

No. 20-12814-MKN

Adv. Proc. No. 21-01254-mkn

United States Bankruptcy Court, D. Nevada

May 15, 2024

ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT ^[1]

Mike K. Nakagawa, Judge.

On December 28, 2023, the court heard the Plaintiff's Motion for Summary Judgment brought in the above-captioned adversary proceeding (“Summary Judgment Motion”). The appearances of counsel were noted on the record. After arguments were presented, the matter was taken under submission.

BACKGROUND

On June 11, 2020, Petersen Dean, Inc. ("PDI") and PD Solar Inc. ("PDS"), along with fourteen other entities (collectively, "Debtors"), commenced separate Chapter 11 proceedings. PDI contracts with homebuilders and other general contractors to install roofing and solar panels at residential and commercial projects. Projects include installations at large subdivisions as well as direct consumer sales. PDI operated in California, Hawaii, Nevada Arizona, Texas, Colorado, and Florida. PDS is a subsidiary of PDI engaged primarily in the installation of solar panels at consumer projects. (ECF No. 1).^[2]

On June 23, 2020, an order was entered authorizing joint administration of the PDI and PDS proceedings with the remaining Chapter 11 debtors, and a separate entity known as Red Rose, Inc., ("Red Rose") was designated as the lead debtor in possession. (ECF No. 94).

On July 13, 2020, PDI filed its schedules of assets and liabilities ("PDI Schedules").^[3](ECF No. 358).

On July 31, 2020, an order was entered authorizing the Debtors to use the cash collateral of its primary pre-petition lender, ACF Finco I LP ("ACF"). (ECF No. 601).

On September 3, 2020, an order was entered authorizing the Debtors to pay certain prepetition creditors as "critical vendors" in the case ("Critical Vendor Order"). (ECF No. 917).

On September 29, 2020, PDS filed its schedules of assets and liabilities ("PDS Schedules").^[4]

On November 16, 2020, an order was entered approving a compromise that permitted, inter alia, the avoidance claims held by the Chapter 11 estates to be pursued by ACF under an arrangement to share net proceeds of any recovery. (ECF No. 1328).

On February 23, 2021, an order was entered approving, inter alia, a sale of substantially all the assets of the Debtors' commercial division and confirming the transfer to the avoidance claims to ACF. (ECF No. 1704).

On November 19, 2021, ACF filed a complaint ("Complaint"), commencing the current adversary proceeding against defendant Taylor Metal, Inc., d/b/a/ Taylor Metal Products ("Taylor" or "Defendant"). (AECF No. 1). Defendant is located in Salem, Oregon, and is a pre-petition vendor that supplied materials to PDI and PDS.

On December 23, 2021, Defendant answered the Complaint. (AECF No. 9).

On February 3, 2023, an order was entered granting Plaintiff leave to amend its Complaint. (AECF No. 35).

On February 6, 2023, Plaintiff filed an amended complaint ("Amended Complaint"). (AECF No. 37). The Amended Complaint is framed as three separate counts: (I) avoidance of prepetition preferential payments under Section 547; (II) avoidance of unauthorized post-petition payments under Section 549; and (III) recovery of avoided payments under Section 550. The Amended Complaint identifies six separate prepetition payments that occurred on March 13 2020, March 16, 2020, April 24, 2020, April 28, 2020, May 8 2020, and May 5, 2020, totaling $114,327.07. It also identifies three separate post-petition payments that occurred on July 27, 2020, August 6, 2020, and September 18, 2020, totaling $18,325.83.

On March 1, 2023, Defendant answered the Amended Complaint ("Answer"). (AECF No. 39). On March 23, 2023, a joint amended discovery plan was filed ("Discovery Plan"). (AECF No. 40).

On September 15, 2023, a stipulated order was entered granting an extension of time to October 30, 2023, for any dispositive motions to be filed. (AECF No. 45).^[5] On October 30, 2023, Plaintiff filed the instant Summary Judgment Motion, accompanied by a Separate Statement of Undisputed Facts ("SUF"), and a supporting Declaration of Garrett Nye, Esq. ("Nye Declaration").^[6] Plaintiff seeks summary judgment only on the preference claims under Section 547 that are encompassed by counts I and III of its Amended Complaint. The motion was noticed to be heard on December 28, 2023. (AECF Nos. 47-50). Defendant did not file its own summary judgment motion.

On November 20, 2023, Defendant filed a response ("Response") to the Summary Judgment Motion but did not file a counter-motion for summary judgment as permitted by Local Rule 7056(e). Attached to the Response is the Declaration of Keith Bailey ("Bailey Declaration").^[7] (AECF No. 53). Three exhibits are attached to the Bailey Declaration: (1) a list of vendor invoices from October 30, 2019 through March 11, 2020, with payments received from PDS or joint checks between March 13, 2020, to May 14, 2020, and with open payment dates from a low of 51 days to a high of 167 days ("Invoice List"); (2) various identification and confirmation materials for services provided by Defendant on projects commenced from November 19, 2019 through January 22, 2020; and (3) a list provided to PDI of sale invoices dated between March 13, 2020 to June 11, 2020 ("Preference Period List").

On December 7, 2023, Plaintiff filed its reply ("Reply") to the Response. (AECF No. 56).

SUMMARY JUDGMENT STANDARDS

A motion for summary judgment is governed by Civil Rule 56 which is applicable in this adversary proceeding under Bankruptcy Rule 7056. See Silva v. Smith's Pac. Shrimp, Inc. (In re Silva), 190 B.R. 889, 891 (B.A.P. 9th Cir. 1995). Summary judgment may be granted only if "the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). For summary judgment purposes "[m]aterial facts are those that may affect the outcome of the case." Farmer v. Las Vegas Metro. Police Dep't, 423 F.Supp.3d 1008, 1013 (D. Nev. 2019), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1985).^[8]

A genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The moving party's evidence is judged by the same standard of proof applicable at trial. See Celotex Corp. v. Catrett, 477 U.S. 316, 323 (1986). The burden of proof is on the party seeking the summary judgment, but the inferences are viewed in favor of the opposing party. See Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 456 (1992). Determinations of intent or credibility generally are ill-suited for disposition by summary judgment. See Fogel Legware, etc. v. Wills (In re Wills), 243 B.R. 58, 65 (B.A.P. 9th Cir. 1999); see generally 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure: Civil § 2726 (4th ed. 2023). Once the moving party demonstrates the absence of disputed material facts, the responding party must provide admissible evidence raising a genuine dispute. The responding party cannot rely solely on conclusory allegations unsupported by factual data. See Farmer v. Las Vegas Metro. Police Dep't, 423 F.Supp.3d at 1014 ("the nonmoving party cannot avoid summary judgment by relying solely on conclusory allegations that are unsupported by factual data [. . . .] Instead, the opposition must go beyond the assertions and allegations of the pleadings and set forth specific facts by producing competent evidence that shows a genuine issue for trial.") (external citations omitted).

DISCUSSION

Plaintiff currently seeks summary judgment only on Counts I and III respectively, to avoid preferential payments under Section 547 and to recover the payments under Section 550. It does not seek relief at this time on Count III to recover any post-petition transfers under Section 549.

I. Preference Elements under 11 U.S.C. § 547(b).

Section 547(b) spells out the requisite elements of an avoidable preference that must be established by a preponderance of the evidence:

Except as provided in subsections (c) and (i) 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;

(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;^[9]

(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.

See 11 U.S.C. § 547(b).

Under Section 547(g), Plaintiff has the burden proof on each of the elements prescribed by Section 547(b). Section 547(c) spells out nine specific affirmative defenses to a preferential transfer that must be established by a preponderance of the evidence. Under Section 547(g), Defendant has the burden proof on each of the elements prescribed by Section 547(c).

II. Preference Defenses under 11 U.S.C. § 547(c).

Defendant does not deny that the elements of Section 547(b) are satisfied for each of the six transfers. Instead, Defendant asserts three affirmative defenses provided under Section 547(c)(1), (c)(2), and (c)(4). Section 547(c) provides that "The trustee may not avoid under this...