IN RE: CALUMET FARM, INC. CASE NO. 91-51414

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

IN RE:

CALUMET FARM, INC. CASE NO. 91-51414

DEBTOR

PHOENIX CORPORATION, Formerly known

as CALUMET FARM, INC. PLAINTIFF

VS. ADVERSARY NO. 93-5037

CRAIG B. SINGER

d/b/a Singer Ranch DEFENDANT

MEMORANDUM OPINION

This matter is before the court on the motion of the defendant, Craig B. Singer, d/b/a Singer Ranch ("Singer"), for summary judgment on the original complaint of the plaintiff debtor in possession.

The complaint seeks to recover from Singer a payment in the amount of $400,000 made by the debtor, Calumet Farm, Inc., to Singer by wire transfer on March 7, 1991. The funds wire transferred were applied as a payment on a note in the amount of $689,487.00. The note was executed on January 14, 1991 on behalf of the debtor by J. T. Lundy, president of the debtor, and by J. T. Lundy individually.

The note evidenced an obligation of Calumet Farm, Inc. to refund to Singer stud fees and sales tax which he had prepaid for the right to breed four mares to the stallion ALYDAR during the 1991 breeding season under stallion service agreements acquired by Singer on June 29, 1990. ALYDAR died on November 15, 1990 before the commencement of the 1991 breeding season. Under the terms of the stallion service agreements Singer was entitled to a refund of the amount he had paid to Calumet for the seasons and for payment of the state sales tax thereon that would be owing when the seasons were exercised.

Calumet Farm, Inc. was unable to, or in any event did not forthwith, refund to Singer with interest the monies he had paid for the breeding rights under the stallion service agreements. Following several weeks of negotiation after the date of the death of ALYDAR, Calumet Farm, Inc. and Lundy executed the note dated January 14, 1991, and Calumet Farm, Inc., acting by and through its president, J. T. Lundy, and J. T. Lundy individually, executed an assignment and security agreement conveying to Singer a security interest in 21 thoroughbred horses and an assignment of a total of 40 breeding seasons to three Calumet stallions, to secure payment of the indebtedness evidenced by the note. Singer did not perfect his security interest in the collateral by filing a UCC-1 Form in the Fayette County Clerk's office until February 11, 1991.

By Count I of the complaint the debtor in possession seeks to avoid the March 7, 1991 $400,000 payment on the January 14, 1991 note as a preference under 11 U.S.C. 547, relying on the one-year reach back period in 547(b)(4)(B) as being applicable because J. T. Lundy, the president of the debtor, an insider as defined by 11 U.S.C. 101(31)(B)(ii), as a co-obligor on the note benefitted from the payment by having his liability on the note reduced.

By Count II of the complaint the debtor in possession seeks to avoid the $400,000 payment as a preference under Kentucky law, K.R.S. 378.060 et seq., as made applicable by title 11 U.S.C. 544(b). The reach back period for avoiding a transfer as a preference under Kentucky law is six months. The March 7, 1991 payment was made within six months of the date Calumet Farm, Inc. filed its petition for relief under chapter 11 of the Bankruptcy Code on July 11, 1991.

By an agreed order entered on November 18, 1992 in the bankruptcy cases of Calumet Farm, Inc., Case No. 91-01414 and Calumet-Gussin No. 1, Case No. 91-01413, in exchange for stallion service certificates for two foals (a 1992 foal by CRIMINAL TYPE out of MISS PREAKNESS and a 1992 foal by WILD AGAIN out of SUNSHINE LINDA), Singer relinquished his assertion that the $689,487.00 note dated January 14, 1991 is secured by a security interest in equine collateral covered by the security agreement and assignment of even date, but subsequently perfected on February 11, 1991, within the 90-day preference period fixed by 11 U.S.C. 547(b)(4)(A). The agreed order was entered prior to the commencement of this adversary proceeding and thus obviated the question of whether the $400,000 payment by wire transfer was a payment on a secured claim. It appeared that the equine collateral pledged to secure the January 14, 1991 note was encumbered by a prior perfected security interest of First City, Texas-Houston to secure payment of an indebtedness far in excess of the value of this collateral and other collateral in which the bank held a security interest.

The debtor in possession has filed an amended complaint which requests avoidance of the February 11, 1991 UCC-1 filing as a preferential transfer, but it is apparent to the court why this issue is moot in view of the aforementioned agreed order.

The court has considered the pleadings, the briefs filed in behalf of the parties, and all the documents of the appendix to the defendant Singer's motion for summary judgment. It is the opinion of the court that these documents do not resolve but rather conclusively indicate that there is a material issue of fact concerning the solvency of Calumet Farm, Inc. on March 7, 1991.

Accordingly, the motion of the defendant Singer for summary judgment on Counts I and II of the original complaint is overruled.

Dated:

By the court -

 

______________________________

JOE LEE, CHIEF JUDGE

 

Copies to:

 

Donald A. Tarkington, Esq.

Robert W. Wilmott, Jr., Esq.

Don A. Pisacano, Esq.

Philip A. Hanrahan, Esq.

William T. Shier, Esq.

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

 

 

IN RE:

 

CALUMET FARM, INC. CASE NO. 91-51414

 

DEBTOR

 

 

PHOENIX CORPORATION, Formerly known

as CALUMET FARM, INC. PLAINTIFF

 

VS. ADVERSARY NO. 93-5037

 

CRAIG B. SINGER

d/b/a Singer Ranch DEFENDANT

 

 

ORDER

 

 

In conformity with the memorandum opinion of the court this day entered, IT IS ORDERED that the motion of the defendant, Craig B. Singer, d/b/a Singer Ranch, for summary judgment on Counts I and II of the original complaint in this action is overruled.

Dated:

By the court -

 

_____________________________

JOE LEE, CHIEF JUDGE

 

Copies to:

 

Donald A. Tarkington, Esq.

Robert W. Wilmott, Esq.

Don A. Pisacano, Esq.

Philip L. Hanrahan, Esq.

William T. Shier, Esq.