Gordon v. Mcghee Auto Sales, Inc. (In re Goins)
598 B.R. 497
Bankr. N.D. Ga.2019Background
- Debtors (Goins and Gibbs) filed Chapter 13 in 2013; plan confirmed in 2014 and converted to Chapter 7 in April 2016; trustee filed this adversary proceeding in October 2017.
- Debtors received a postpetition $500,000 personal-injury settlement in 2015; approximately $286,971.37 was deposited to their joint account after deductions.
- Debtors used substantial portions of the settlement to buy vehicles (gifts) for adult children and grandchildren, purchasing cars from McGhee Auto Sales (Defendant).
- Trustee sought avoidance under 11 U.S.C. § 549, recovery under § 550, preservation under § 551, and turnover under § 542; Defendant asserted factual disputes and defenses including that it was a good‑faith subsequent transferee and that an attorney intermediary (Montlick) was the initial transferee.
- Summary judgment granted for Trustee: transfers were avoidable postpetition estate property; Trustee may recover value of the Second–Fifth Transfers in full and the First Transfer subject to any amounts previously recovered in a related adversary (Goins AP).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Avoidability under § 549: were the car purchases postpetition transfers of estate property made without authorization? | Transfers were post-confirmation postpetition estate property and unauthorized, so avoidable under § 549. | Contended Trustee must show insolvency or other special circumstances; raised factual disputes about initial transfer chain. | Granted for Trustee: transfers were postpetition estate property and unauthorized; avoidable under § 549. |
| Recovery under § 550: may Trustee recover from Defendant; is Defendant an initial or subsequent transferee with § 550(b) good‑faith defense? | Trustee: Defendant is liable as the initial transferee (no evidence Montlick controlled funds); § 550(b) defense not established. | Defendant: Montlick was the initial transferee, so Defendant is a subsequent transferee entitled to good‑faith defense (took for value, unaware of bankruptcy). | Granted for Trustee: record shows Defendant was initial transferee of funds it received; Defendant failed to prove § 550(b) defense and is liable for Second–Fifth Transfers and First Transfer subject to prior recoveries. |
| Double recovery / prior related judgment effect (§ 550(d)) | Trustee: entitled to single satisfaction; can recover full value here subject to offsets for amounts already collected in related Goins AP. | Defendant: Trustee cannot recover here because of prior default judgment in Goins AP (claimed satisfaction). | Court: § 550(d) allows only a single satisfaction; Trustee may not recover amounts already obtained in Goins AP for same vehicles—First Transfer recovery reduced by any amounts previously collected for those vehicles. |
| Turnover and preservation (§ 542, § 551) | Trustee: avoided transfers are preserved for the estate under § 551 and Defendant must turn over property or value under § 542. | Defendant: raised equitable and setoff/recoupment arguments (costs, improvements, innocent purchaser). | Granted for Trustee: transfers preserved under § 551; turnover required under § 542; Defendant not entitled to § 550(e) lien or setoff because costs predated transfer and statutory requirements unmet. |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden-shifting)
- Harwell (In re Harwell), 628 F.3d 1312 (initial transferee / conduit analysis)
- Marathon Petroleum Co. v. Cohen (In re Delco Oil), 599 F.3d 1255 (scope of § 549/§ 550 and lack of innocent‑transferee exception)
- Dzikowski v. Northern Trust Bank (In re Prudential of Fla. Leasing), 478 F.3d 1291 (§ 550(d) single satisfaction principle)
- Wellness Int'l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (bankruptcy core‑proceeding authority)