In re DJ Weaver Development Co., LLC, Case No. 06-33059 (Bankr. E.D. Tenn. 11/5/2008)

Page 1

In re DJ WEAVER DEVELOPMENT CO., LLC d/b/a THE GAZEBO AT WATERFORD COVE Debtor W. GREY STEED, TRUSTEE FOR THE BANKRUPTCY ESTATE OF DJ WEAVER DEVELOPMENT CO., LLC d/b/a THE GAZEBO AT WATERFORD COVE Plaintiff, v. PARROTT MARINE SYSTEMS, INC., SHOREMASTER, and GALVA FOAM MARINE INDUSTRIES, INC. Defendants.

Case No. 06-33059.

Adv. Proc. No. 07-3022.

United States Bankruptcy Court, E.D. Tennessee.

November 5, 2008.

Brenda G. Brooks, Esq., MOORE & BROOKS, Knoxville, Tennessee, Attorneys for Plaintiff, W. Grey Steed, Trustee.

John O. Threadgill, Esq., THREADGILL LAW FIRM, P.C., Knoxville, Tennessee, Attorneys for Defendant, Parrott Marine Systems, Inc.

Christopher T. Cain, Esq., BALL & SCOTT, Knoxville, Tennessee, Attorneys for Defendants, Shoremaster and Galva Foam Marine Industries, Inc.

T. Lynn Tarpy, Esq., HAGOOD, TARPY & COX, PLLC, Knoxville, Tennessee, Attorneys for Debtor.

MEMORANDUM ON MOTIONS FOR SUMMARY JUDGMENT

RICHARD STAIR, JR. BANKRUPTCY JUDGE.

This adversary proceeding is before the court upon the Complaint filed by the Debtor on March 22, 2007, seeking a turnover of property of the Debtor's bankruptcy estate pursuant to 11 U.S.C. § 542 (2005) and seeking a determination that the Defendants violated the automatic stay of 11 U.S.C. § 362(a)(3) (2005).¹ Answers were filed by the Defendants, Galva Foam Marine Industries, Inc. (Galva Foam) and Shoremaster, on April 10, 2007, and by Parrott Marine Systems, Inc. (Parrott Marine) on July 9, 2007. Pursuant to the Amended Pretrial Order entered on February 8, 2008, the court is called upon to resolve the following issues:

Whether pursuant to 11 U.S.C. § 542 the defendants are responsible for the turnover of $94,836.00 paid by the debtor prepetition.

Whether the defendants' ongoing failure to turnover property of the estate after being notified violates the automatic stay provision of 11 U.S.C. § 362.

What if any of the $94,836.00 paid by the debtor on the two dock contracts is property of the debtor.

If any of the $94,836.00 is property of the debtor who is responsible or liable for turning over that property.

If any of the $94,836.00 is property of the debtor, did either of the defendants violate the automatic stay provision of 11 U.S.C. § 362.

On April 28, 2008, the Plaintiff filed a Motion for Summary Judgment (Plaintiff's Motion for Summary Judgment) accompanied by, as required by E.D. Tenn. LBR 7056-1, the Plaintiff's Brief in Support of Motion for Summary Judgment (Plaintiff's Brief) and a Statement of Undisputed Facts in Support of Motion for Summary Judgment (Plaintiff's Statement of Undisputed Facts), incorporating the following ten exhibits: (A) the Plaintiff's Requests for Admissions dated February 22, 2008, propounded to the Defendants; (B) Parrott Marine's Responses to Requests for Admissions dated February 29, 2008; (C) Parrott Marine's Amended Response to Requests for Admissions dated March 18, 2008; (D) Responses to Requests for Admissions by Shoremaster and Galva Foam dated March 14, 2008; (E) Answer filed by Parrott Marine on July 9, 2007; (F) Excerpt from the September 21, 2006 deposition of Kirk Parrott in Parrott Marine Systems, Inc. v. Shoremaster, et al., No. 165747-2, Chancery Court for Knox County, Tennessee; (G) Excerpt from the November 16, 2006 proceedings in Parrott Marine Systems, Inc. v. Shoremaster, et al., No. 165747-2, Chancery Court for Knox County, Tennessee; (H) Memorandum Opinion dated January 17, 2007, in Parrott Marine Systems, Inc. v. Shoremaster, et al., No. 165747-2, Chancery Court for Knox County, Tennessee; (I) Judgment entered February 22, 2007, and Order denying a motion to alter or amend entered on March 16, 2007, in Parrott Marine Systems, Inc. v. Shoremaster, et al., No. 165747-2, Chancery Court for Knox County, Tennessee; and (J) a letter dated November 14, 2005, from Garry Bowhall with Shoremaster to Kirk Parrott of Parrott Marine.

In accordance with E.D. Tenn. LBR 7007-1(a) and 7056-1(b), Shoremaster and Galva Foam filed the Defendants Shoremaster's and Galva Foam's Local Rule 7007-1 Response and Brief in Opposition to Plaintiff's Motion for Summary Judgment together with Shoremaster's and Galva Foams' Respo[nse] to Plaintiff's Statement of Undisputed Facts in Support of Motion for Summary Judgment (Shoremaster's and Galva Foam's Response to Plaintiff's Statement of Undisputed Facts) on May 2, 2008, attaching as an exhibit an excerpt from the November 16, 2006 Transcript of Proceedings in conjunction with litigation between the parties in the Chancery Court for Knox County, Tennessee, styled Parrott Marine Systems, Inc. v. Shoremaster and Galva Foam Marine Industries, Inc., No. 165747-2.

Parrott Marine did not timely file a response to the Plaintiff's Motion for Summary Judgment or to the Plaintiff's Statement of Undisputed Facts. Accordingly, Parrott Marine "does not oppose the relief requested by the motion" and "the material facts set forth in the movant's statement will be deemed admitted." E.D. Tenn. LBR 7007-1(a), 7056-1(b).²

On May 2, 2008, Shoremaster and Galva Foam filed the Defendants Shoremaster's and Galva Foam's Motion for Summary Judgment (Shoremaster's and Galva Foam's Motion for Summary Judgment) accompanied by the Defendants Shoremaster's and Galva Foam's Local Rule 7007-1 Brief in Support of Motion for Summary Judgment (Shoremaster's and Galva Foam's Brief) and Defendants Shoremaster's and Galva Foam's Local Rule 7056-1 Statement of Undisputed Material Facts (Shoremaster's and Galva Foam's Statement of Undisputed Facts) incorporating the following nineteen exhibits: (A) Sale Agreement between Parrott Marine and the Debtor dated July 19, 2004, concerning Dock #1; (B) Sale Agreement between Parrott Marine and the Debtor dated March 18, 2004, concerning Dock #2; (C) Sale Agreement between Parrott Marine and the Debtor dated March 18, 2004, concerning Dock #3; (D) Sale Agreement between Parrott Marine and the Debtor dated March 18, 2004, concerning Dock #6; (E) Sales Agreement between Galva Foam and Parrott Marine dated March 18, 2004, concerning Dock #1; (F) Sales Agreement between Galva Foam and Parrott Marine dated March 18, 2004, concerning Dock #2; (G) Sales Agreement between Galva Foam and Parrott Marine dated March 22, 2004, concerning Dock #3; (H) Sales Agreement between Galva Foam and Parrott Marine dated March 22, 2004, concerning Dock #6; (I) Excerpt from the January 31, 2008 deposition of Dennis Weaver; (J) a Loan Disbursement Check issued by First National Bank of Lenoir City dated March 31, 2004, labeled Loan Proceeds, payable to Galva Foam and Parrott Marine in the amount of $200,000.00; (K) letter dated October 20, 2005, from Dennis J. Weaver to Kirk Parrott; (L) Complaint filed November 30, 2005, commencing Parrott Marine Systems, Inc. v. Shoremaster, et al., No. 165747-2, Chancery Court for Knox County, Tennessee; (M) letter dated February 27, 2006, from Garry Bowhall with Shoremaster to Dennis Weaver; (N) Answer and Counter-Claim dated March 13, 2006, in Parrott Marine Systems, Inc. v. Shoremaster, et al., No. 165747-2, Chancery Court for Knox County, Tennessee; (O) Memorandum Opinion dated January 17, 2007, in Parrott Marine Systems, Inc. v. Shoremaster, et al., No. 165747-2, Chancery Court for Knox County, Tennessee; (P) Judgment entered February 22, 2007, in Parrott Marine Systems, Inc. v. Shoremaster, et al., No. 165747-2, Chancery Court for Knox County, Tennessee; (Q) letter dated March 5, 2007, from Lynn Tarpy, attorney for the Debtor, to Christopher T. Cain and John O. Threadgill, attorneys for the Defendants; (R) letter dated March 8, 2007, from Christopher T. Cain to Lynn Tarpy; and (S) Excerpt from the November 16, 2006 proceedings in Parrott Marine Systems, Inc. v. Shoremaster, et al., No. 165747-2, Chancery Court for Knox County, Tennessee.

In accordance with E.D. Tenn. LBR 7007-1(a) and 7056-1(b), the Plaintiff filed the Plaintiff's Response to Shoremaster and Galva Foam's Motion for Summary Judgment, as well as the Plaintiff['s] Response to Defendants Shoremaster's and Galva Foam's Local Rule 7056-1 Statement of Undisputed Material Facts (Plaintiff's Response to Defendants' Statement of Undisputed Material Facts) on May 22, 2008.

In its resolution of the cross motions for summary judgment, the court additionally takes judicial notice of the decision of the Tennessee Court of Appeals in Parrott Marine Systems, Inc. v. Shoremaster, Inc., and Galva Foam Marine Industries, Inc., 2008 Tenn. App. LEXIS 490, 2008 WL 3875432 (Tenn. Ct. App. Aug. 21, 2008).

This is a core proceeding. 28 U.S.C. § 157(b)(2)(A), (E), (O) (2005).

I

In March and July 2004, the Debtor contracted with Parrott Marine for the fabrication, delivery, and installation of four marine docks, numbered 1, 2, 3, and 6, at the following prices: Dock #1-$293,037.00; Dock #2-$234,948.14; Dock #3-$142,257.56; and Dock #6-$142,257.66.³ Shoremaster's and Galva Foam's Stmt. of Undisp. Facts ¶ 1, EXS. A-D. Docks #1 and #3 were manufactured, delivered, and installed, and all balances owed to Parrott Marine by the Debtor under the contracts were paid directly to Parrott Marine and are not at issue in this adversary proceeding. SHOREMASTER'S AND GALVA FOAM'S STMT. OF UNDISP. FACTS ¶¶ 22, 23, COLL. EX. I at p. 11, lines 1-3. Docks #2 and #6 were to be built and installed in the future, "a year plus down the road." SHOREMASTER'S AND GALVA FOAM'S STMT. OF UNDISP. FACTS ¶ 6, COLL. EX. I at p. 10, lines 6-10. "Initial disbursements" to Parrott Marine, "due with signed contract and approved plans," were $59,772.00 for Dock #2 and $35,064.00 for Dock #6. SHOREMASTER'S AND GALVA FOAM'S STMT. OF UNDISP. FACTS ¶¶ 3, 5, EXS. B, D. Notwithstanding that Docks #2 and #6 were not scheduled to be built, the Debtor paid these "initial disbursements," totaling $94,836.00, in order "to hold the price" because steel prices "were going out of sight." SHOREMASTER'S AND GALVA FOAM'S STMT. OF UNDISP. FACT...