IN RE: KENTUCKY TRUCK AND CASE NO. 94-50120

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

IN RE:

KENTUCKY TRUCK AND CASE NO. 94-50120

VAN CENTER, INC.

DEBTOR

JAMES D. LYON, TRUSTEE PLAINTIFF

VS. ADVERSARY NO. 94-5054

DAVID GASKIN; CENTRAL BANK;

NATIONAL CITY BANK; ANGELA GASKIN DEFENDANTS

MEMORANDUM OPINION

This matter is before the court on motion of the plaintiff trustee, James D. Lyon, for partial summary judgment avoiding preferential transfers evidenced by five checks representing payment to or for the benefit of David Gaskin from the debtor's bank account. The payments aggregate $81,988.94. The trustee seeks judgment against Gaskin in that amount.

On March 9, 1993, David Gaskin wrote a check to "Ky Truck & Van & Tommy Mitchell" for $35,000. The proceeds of the check were deposited to the account of the debtor, Kentucky Truck and Van Center, Inc. Exhibit No. 1 to Deposition of David K. Gaskin, 10-19-94. Gaskin believes he gave this money to Tommy Mitchell for 50% of the stock of the debtor. According to Gaskin, Mitchell was to own 25% of the stock of the debtor, Mitchell's wife, Gwen Mitchell, was to own 25% of the stock, and Gaskin was to own 50% of the stock of the debtor. However, Gaskin was not issued any stock of the debtor prior to February 2, 1994, the date the debtor filed a petition for relief under chapter 7 of the Bankruptcy Code. He never obtained any written documentation of an ownership interest in the debtor. Tr. 7-10. Apparently Mitchell has characterized the $35,000 received from Gaskin as a loan to the debtor. Tr. 9.

On October 13, 1993, Gaskin obtained a loan from Central Bank and Trust Company evidenced by a mortgage note for the amount of $35,750. To secure payment of the indebtedness evidenced by the note Gaskin and his wife Angela granted to the bank a second mortgage on their residence at 992 Woodshire Way a/k/a 4705 Sharon Drive, Lexington, Fayette County, Kentucky. The loan documents indicate the loan was for business use, to purchase inventory for Kentucky Truck and Van Center, Inc. It appears to be conceded that the proceeds of the loan were deposited in the debtor's bank account and were used for this purpose.

On October 19, 1993, Gaskin was issued a check in the amount of $5,000 by the debtor in partial repayment of a $10,000 loan Gaskin had made to the debtor prior to the October 13, 1993 when it was discovered the debtor's bank account was overdrawn allegedly due to embezzlement by the debtor's bookkeeper. The exact date of this earlier loan to the debtor is not evident from the record.

On October 20, 1993, Randall L. Dunigan loaned the debtor $125,000 as evidenced by two checks deposited to the debtor's bank account on that date.

On November 23, 1993, the debtor issued a check in the amount of $35,099 payable to Central Bank and Trust Company to pay off the mortgage executed by Donald Gaskin and his wife to the bank on October 13, 1993. Thereafter, on December 9, 1993, the bank released its mortgage on the residence of the Gaskins. This payment in effect returned to Gaskin substantially all of the amount of $35,750 he had caused to be deposited in the debtor's bank account on October 13, 1993.

On December 13, 1993, Gaskin was issued another check in the amount of $5,000 by the debtor which paid off the balance of the $10,000 loan Gaskin had advanced to the debtor.

On December 14, 1993, Gaskin, whose authority to issue checks on the debtor's bank account had not been rescinded, wrote himself two checks on the debtor's account, one for $36,750 and another for $139.94. According to Gaskin, he wrote these checks to himself to recoup his investment in the debtor after Mitchell fired him and informed him he had never been issued any stock in the debtor.

To recapitulate, the payments made to or for the benefit of Gaskin were as follows:

10-19-93 $ 5,000.00

11-23-93 35,099.00

12-13-93 5,000.00

12-14-93 36,750.00

12-14-93 139.94

$81,988.94

 

The complaint seeks to avoid as preferential numerous other payments received by Gaskin as evidenced by checks issued to Gaskin on the debtor's bank account. However, the trustee's motion for partial summary judgment relates only to the above enumerated payments. All of these payments were received by Gaskin within 90 days of the debtor's bankruptcy during which time there is a presumption that the debtor was insolvent. 11 U.S.C. 547(f). Gaskin has offered no evidence to rebut this presumption.

In view of the fact that Gaskin was never a shareholder of the debtor the monies he deposited in the debtor's bank account were loans rather than capital contributions and the aforementioned payments received by Gaskin were loan repayments which were preferential.

The motion of the trustee for a judgment against Gaskin for the aggregate amount of these payments in repayment of loans made by Gaskin to the debtor should be sustained.

Dated:

By the court -

 

________________________________

JOE LEE, CHIEF JUDGE

 

 

Copies to:

 

James D. Lyon, Esq.

Randy Shaw, Esq.

Tracey Wise, Esq.

Scott Rickman, Esq.

David Gaskin

Angela Gaskin

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

 

 

IN RE:

 

KENTUCKY TRUCK AND CASE NO. 94-50120

VAN CENTER, INC.

 

DEBTOR

 

 

JAMES D. LYON, TRUSTEE PLAINTIFF

 

VS. ADVERSARY NO. 94-5054

 

DAVID GASKIN; CENTRAL BANK;

NATIONAL CITY BANK; ANGELA GASKIN DEFENDANTS

 

 

 

JUDGMENT

 

 

In conformity with the memorandum opinion of the court this day entered, IT IS ORDERED AND ADJUDGED that the motion of the plaintiff trustee, James D. Lyon, for summary judgment against the defendant David Gaskin in the amount of $81,988.94 is sustained.

Dated:

By the court -

 

_______________________________

JOE LEE, CHIEF JUDGE

 

Copies to:

 

James D. Lyon, Esq.

Randy Shaw, Esq.

Tracey Wise, Esq.

Scott Rickman, ESq.

David Gaskin

Angela Gaskin