In Matter of Arensdorf, Case No. BK07-41844-TLS (Bankr.Neb. 1/8/2009), Case No. BK07-41844-TLS.

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IN THE MATTER OF: MARVIN RALPH ARENSDORF, Ch. 7, Debtor(s) PHILIP M. KELLY, Chapter 7, Trustee, Plaintiff, v. REC, INC.; M. DEAN KURTH; CHERYL KURTH; and BETTY KURTH, Defendants.

Case No. BK07-41844-TLS.

No. A08-4049-TLS.

United States Bankruptcy Court, D. Nebraska.

January 8, 2009.

ORDER

THOMAS L. SALADINO, Chief Judge.

This matter is before the court on the Chapter 7 trustee's motion for summary judgment (Fil. #29) and resistance by REC, Inc. (Fil. #35). Philip M. Kelly represents himself as trustee, and Timothy P. Brouillette represents REC, Inc., and the Kurth defendants. Evidence and briefs were filed and, pursuant to the court's authority under Nebraska Rule of Bankruptcy Procedure 7056-1, the motion was taken under advisement without oral arguments.

In 1996, Marvin Arensdorf and M. Dean Kurth formed REC, Inc., to purchase a recycling business in North Platte, Nebraska. They each held 50 percent of the corporate stock. Mr. Arensdorf filed a Chapter 7 bankruptcy petition on October 1, 2007, and Mr. Kelly was appointed as trustee for the case. In November 2007, Mr. Kurth arranged to purchase the debtor's shares of REC stock for $26,000. Three days prior to purchasing the debtor's stock, Mr. Kurth entered into an agreement to sell the business to a third party for $380,000. This specific information was not disclosed to the debtor, nor was the trustee aware of any part of the transaction. The trustee alleges that Mr. Kurth breached his fiduciary duty to the corporation and to Mr. Arensdorf, and by his actions lessened the value of the bankruptcy estate. The trustee seeks to avoid the transfer of Mr. Arensdorf's stock interest and to recover assets for the benefit of the estate.

Mr. Kurth testified in a deposition that Mr. Arensdorf had not been involved in the business since mid-1998. Mr. Kurth had operated the business since that time. When Mr. Kurth approached him in June 2007 about wanting to sell the business, Mr. Arensdorf allegedly asked only to be repaid his initial investment of $25,000 or $26,000.

The trustee has moved for summary judgment on the issue of the contract for purchase of the debtor's stock. If that transfer is avoided under 11 U.S.C. § 549 and the trustee recovers the stock, he then intends to pursue the debtor's portion of the proceeds of the sale of the business.

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Summary judgment is appropriate only if the record, when viewed in the light most favorable to the non-moving party, shows there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(c) (made applicable to adversary proceedings in bankruptcy by Fed. R. Bankr. P. 7056); see, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986); Aviation Charter, Inc. v. Aviation Research Group/US, 416 F.3d 864, 868 (8th Cir. 2005); Ferris, Baker Watts, Inc. v. Stephenson (In re MJK Clearing, Inc.), 371 F.3d 397, 401 (8th Cir. 2004); Williams v. Marlar (In re Marlar), 267 F.3d 749, 755 (8th Cir. 2001). To withstand a motion for summary judgment, the nonmoving party must submit "sufficient evidence supporting a material factual dispute that would require resolution by a trier of fact." Austin v. Minnesota Mining & Mfg. Co., 193 F.3d 992, 994 (8th Cir. 1999) (quoting Hase v. Missouri Div. of Employment Sec., 972 F.2d 893, 895 (8th Cir. 1992), cert. denied, 508 U.S. 906 (1993)).

Section 549 of the Bankruptcy Code authorizes the trustee to avoid any "transfer of property of the estate . . . that occurs after the commencement of the case and . . . that is not authorized under this title or by the court." Snyder v. Dewoskin (In re Mahendra), 131 F.3d 750, 755 (8th Cir. 1997); Youngblut v. Pepmeyer (In re Pepmeyer),...