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In re Big Drive Cattle, LLC

United States District Court, D. Nebraska

June 13, 2014

IN THE MATTER OF BIG DRIVE CATTLE, L.L.C., Debtor.
v.
JAMES A. OVERCASH, Trustee, Chapter 11, Appellee. CAROL KNISLEY, Appellant, Bk. No. 11-42415

MEMORANDUM OPINION

LYLE E. STROM, Senior District Judge.

This matter is before the Court on the appeal of Carol Knisley from the judgment of the United States Bankruptcy Court for the District of Nebraska.

I. Jurisdiction

District courts have jurisdiction to hear appeals "from final judgments, orders, and decrees" of the bankruptcy courts. 28 U.S.C. § 158(a)(1). The United States Bankruptcy Court for the District of Nebraska issued an order granting appellee's motion for summary judgment in this case on February 20, 2014. This is an appeal from a final order of the bankruptcy court. This Court has jurisdiction to hear the appeal.

II. Standard of Review

A court hearing an appeal from the judgment of a bankruptcy court "review[s] [a] grant of summary judgment de novo, viewing the facts in the light most favorable to the nonmoving party." In re Marlar, 267 F.3d 749, 755 (8th Cir. 2001).

III. Factual Background

The appellant held an equity membership interest in Big Drive Cattle, L.L.C. ("BDC") which operates a commercial feedlot. Appellant made several separate purchases of cattle that he shipped to BDC for feeding and care until they reached an appropriate weight, at which time BDC sold them to third parties on appellant's behalf. BDC would deposit the proceeds from the sale of appellant's cattle with Farm Credit Services of America, where it would be applied against BDC's $1.5 million line of credit account. BDC would then pay appellant an amount equal to the proceeds of the sale less the cost of feed. Several payments to appellant under this arrangement occurred in the year before BDC filed for relief under Chapter 11 of the Bankruptcy Code on September 9, 2011, during which time BDC was insolvent. Importantly, at no time did appellant transfer or intend to transfer legal title or ownership of these cattle to BDC.

The trustee James Overcash filed to recover the payments made to appellant after September 9, 2010. The bankruptcy court found in favor of the trustee, and this appeal followed. These facts were not disputed in the bankruptcy court, nor are they disputed here.

IV. Discussion

As noted by the bankruptcy court, the Eighth Circuit has given guidance on avoidance of preference payments:

"Under the Bankruptcy Code's preference avoidance section, 11 U.S.C. § 547, the trustee is permitted to recover, with certain exceptions, transfers of property made by the debtor within 90 days before the date the bankruptcy petition was filed." Barnhill v. Johnson, 503 U.S. 393, 394 (1992). "This rule is intended to discourage creditors from racing to dismember a debtor sliding into bankruptcy and to promote equality of distribution to creditors in bankruptcy.'" Lindquist v. Dorholt (In re Dorholt, Inc.), 224 F.3d 871, 873 (8th Cir. 2000) (quoting Jones Truck Lines, Inc. v. Cent. States, Se. & Sw. Areas Pension Fund (In re Jones Truck Lines, Inc.), 130 F.3d 323, 326 (8th Cir. 1997)).
"Title 11 U.S.C. § 547(b) requires that in order for a transfer to be subject to avoidance as a preference, (1) there must be a transfer of an interest of the debtor in property, (2) on account of an antecedent debt, (3) to or for the benefit of a creditor, (4) made while the debtor was insolvent, (5) within 90 days prior to the commencement of the bankruptcy case, (6) that left the creditor better off than it would have been if the transfer had not been made and the creditor asserted its ...

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