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Nature of Suit Code: 423
Nature of Suit: Bankruptcy Withdrawal 28 USC 157
Cause of Action: 

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UNITED STATES COURT OF APPEALS F I L L D 

FOR THE TENTH CIRCUIT Unit.ed States Court of .Appeal,, 

KENNETH G. M. MATHER, Trustee for Moran 

Pipe & Supply Co., Inc ., Debtor, 

Appellant, 

v. 

I.F. PIPE COMPANY, MIKE KAHN OIL 

COMPANY, KAHN FAMILY VENTURES, MICHAEL 

KAHN, KAHN DRILLING FUND A, J . LEONARD 

LEVY, 

Appellees. 

ORDER AND JUDGMENT* 

Tenth Circuit 

DEC 18 1992 

ROBERT L. HOECKER 

Clerk 

No. 92-7005 

(D.C. No . CIV-90-574-C) 

( E . D . Okla. ) 

Before McKAY, Chief Judge, SEYMOUR, and KELLY, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal . See Fed. R. App. P . 

34(a); 10th Cir. R. 34 . 1 . 9. The case is therefore ordered 

submitted without oral argument. 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36 . 3 . 

Appellate Case: 92-7005 Document: 010110152704 Date Filed: 12/18/1992 Page: 1 
Bankrup tcy trustee Kenne th G. M. Mather appea ls from a jury 

verd ict enter ed in favor o f defendan ts. The trustee b rought t h is 

a cti o n to recover alleged preferen tial t r ans f ers wh ich defendants 

receive d from t he estate of Chapter 7 debtor Moran Pipe & Suppl y 

Company. Following the j u ry's decision, the trustee filed a 

mo tion for judgment no twithstandi ng the verdict, which was denied . 

He now appeals that deni al. We affirm. 

The trustee argues that the evidence presented at trial does 

n ot suppo rt the jury's conclusion that no preferential transfers 

o r fraudulent conveyances occurred between defendants and the 

debto r . He maintains, therefore, that the trial court erred in 

denying the motion for judgment notwithstanding the verdict. We 

review de novo the denial of the j.n.o.v. motion. Goodwin v. 

Ense rch Coll)., 949 F.2d 1098, 1100 {10th Cir. 1991). In doing so, 

however, we view the evidence in a light favorable to the 

defendants. Id. at 1101. "' [W]e may find error only if the 

evidence points but one way and is susceptible to no reasonable 

inferences supporting [the defendants].'" Ralston Dev . Coll). v. 

United States, 937 F.2d 510, 512 {10th Cir. 1991) {quoting 

Zimmerman v . First Fed . Sav. & Loan Ass'n, 848 F.2d 1047, 1051 

{10th Cir. 1988)). 

The debtor and defendants are involved in the tubular pipe 

supply business. When construed favorably to defendants, the 

trial evidence reveals that I.F. Pipe made an oral agreement with 

debtor to facilitate the sale of pipe. Using debtor's customer 

lists, I . F. Pipe sold goods directly to those third parties. The 

pipe came from I.F. Pipe invento ry and was not made part of 

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Appellate Case: 92-7005 Document: 010110152704 Date Filed: 12/18/1992 Page: 2 
debtor's stock. Debtor's involvement was limited to ge nerating 

the paperwork necessary to consummate the sale . 

Debtor wrote out invoices for the sales, and payment on those 

invoices was sent directly to debtor. When receive d, however, the 

checks were diverted from the debtor to the account of I.F . Pipe 

or, in some cases, one of the other defendants. Debtor never took 

possession of the funds . I.F. Pipe deposited the checks, paid its 

suppliers and vendors, and then took a commission on the pipe 

sales. The remaining profit was forwarded to the debtor. 

The trustee's evidence suggested a very different scenario . 

His evidence, as manifested in the testimony of his expert, 

suggested that I.F. Pipe sold goods to debtor, who in turn 

inventoried those goods and sold them to third parties. When 

payment on the invoices came in, however, defendants diverted the 

funds so that they would have an advantage as creditors. The 

trustee's expert testified that, although I.F. Pipe received 

approximately 1.8 million dollars in payment from this arrangement 

with debtor, only five hundred ninety thousand was forwarded to 

debtor's account. The trustee contends that the difference 

between these two figures is the amount owing to the bankruptcy 

estate. 

Pursuant to 11 U.S .C. § 547, the trustee must prove the 

following to establish a voidable preferential transfer: 

(b) Except as provided in subsection (c) of 

section, the trustee may avoid any transfer 

interest of the debtor in property--

(1) to or for the benefit of a creditor; 

this 

of an 

(2) for or on account of an antecedent debt owed 

by the debtor before such transfer was made; 

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Appellate Case: 92-7005 Document: 010110152704 Date Filed: 12/18/1992 Page: 3 
(3 ) made while the debtor was insolvent; 

(4 ) made--

(A) on o r with i n 9 0 days befo re the date of 

the filing of the petition; or 

(B) between ninety days and one year before 

the date of the filing of the petition if 

such creditor at the time of such 

transfer was an insider; and 

(5 ) that enables such creditor to receive more 

than such creditor would receive if--

(A) the case were a case under chapter 7 of 

this title; 

(B) the transfer had not been made; and 

(C) such creditor received payment of such 

debt to the extent provided by the 

provisions of this title. 

11 U. S . C. § 547 (b). Defendants' main argument at trial was that 

debtor never owned the pipe, and therefore that no preferential 

transfer occurred under the statute. 

There can be no preferential transfer if the funds involved 

do not constitute property of the debtor. See Kenan v . Fort Wo rth 

Pipe Co . (In re George Rodman, Inc.), 792 F . 2d 125, 127 (10th Cir. 

1986 ) ; see also Begier v. I.R. S., 496 U.S . 53, 58 (1990) ("The 

reach of§ 547(b) 's avoidance power is ... limited to transfers 

of ' property of the debtor.'" ) .

1 Property of the debtor is 

implicated if the transfer deprives the estate of funds which 

could otherwise be used to satisfy creditors' claims. Kupetz v. 

1 The same showing must be made to establish a fraudulent 

conveyance. Krommenhoek v. A-Mark Precious Metals, Inc . (In 

Bybee), 945 F.2d 309 , 315 (9th Cir. 1991) . For this reason, 

trustee's fraudulent transfer issue falls along with the 

preference issue. 

4 

re 

the 

Appellate Case: 92-7005 Document: 010110152704 Date Filed: 12/18/1992 Page: 4 
United States {In re California Trade Technical Schs., Inc . ), 923 

F.2d 641, 645 (9th Cir. 1991). It is the debtor's control of the 

funds, or lack thereof, which is central to the determination 

whether the transfer involves debtor's property. See Herzo g v. 

Sunarhauserman {In re Network 90°, Inc . ), 126 B.R. 990, 994 (N.D. 

Ill . 1991). 

When viewed in a light most favorable to defendants, the 

record establishes that debtor never had any control over the pipe 

that was transferred or the funds forwarded to pay for that pipe. 

The goods were never made part of debtor's inventory. Moran Pipe 

& Supply's involvement was limited to extending the use of its 

customer lists and the act of sending out invoices and creating 

purchase orders. Furthermore , the bankruptcy estate was not 

diminished under defendants' theory of the case . To the contrary, 

the estate was enhanced as a result of the infusion of profit 

received from the transaction. Given that the record supports 

defendants' contention that the pipe was never property of the 

debtor, we need not reach the other issues raised by the trustee. 

We hold that the district court did not err in denying the motion 

for judgment notwithstanding the verdict. 

The judgment of the United States District Court for the 

Eastern District of Oklahoma is AFFIRMED. 

Entered for the Court 

Stephanie K. Seymour 

Circuit Judge 

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Appellate Case: 92-7005 Document: 010110152704 Date Filed: 12/18/1992 Page: 5