Court Opinion

ID: 8971701
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:34:17.035467+00
Date Added: 2024-06-11T17:10:26.654527
License: Public Domain

MERRITT, Circuit Judge,
dissenting.
Because I believe that the majority has decided disputed issues of fact in its review of the grant of summary judgment in favor of the trustee, I dissent from the majority’s conclusion that the payments at issue are “avoidable preferences” under 11 U.S.C. § 547(a). Summary judgment is appropriate only when there is no genuine issue of material fact and a party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). Especially where making a determination of whether transfers were made in the ordinary course of business,
this [C]ourt must engage in a “peculiarly factual” analysis. The focus of this [C]ourt’s inquiry must be directed to an analysis of the business practices which were unique to the particular parties under consideration and not to the practices which generally prevailed in the industry of the parties. Even if the debtor’s business transactions were irregular, they may be considered “ordinary” for purposes of § 547(c)(2) if those transactions were consistent with the course of dealings between the particular parties.
In re Fulghum Construction Corp., 872 F.2d 739, 743 (6th Cir.1989) (challenged payment not preference because made in the ordinary course of business) (citations omitted). In this case, however, the facts relevant to whether the transfers were made in the ordinary course of business are disputed. These disputed issues of fact preclude summary judgment and mandate trial.
The subject payments, certainly those to the taxing authorities, appear to have been made in the ordinary course of business by a mortgage servicing company. The trustee contends that the payments were made in a way designed to favor and protect the interest of certain large mortgage investors over other smaller investors. The trustee, however, has presented only bold allegations and has failed to substantiate his claims. The payees, as appellants, vigorously dispute the contention that this alleged favoritism occurred. Indeed, the facts on favoritism are unclear and are disputed. In affirming the grant of summary judgment, the Court resolves these disputed propositions of fact in the following conclusory way without any explication of the facts on which it relies:
This court cannot seriously consider appellants’ assertions ... characterizing the transfers here in issue as transfers *921made in the ordinary course of business ... given the totally unorthodox and illegal manner in which debtors conducted their collective business operations....
Majority Opinion at 918. Resolution of this factual dispute should be left for trial and is not the appropriate role of summary judgment.
In addition, the majority mischaracter-izes Drabkin v. District of Columbia, 824 F.2d 1102 (D.C.Cir.1987), as holding that in all cases where the funds cannot be traced a tax payment can be an avoidable preference. See Majority Opinion at 916. Drab-kin, in fact, held that, where a tax payment is made by a debtor within the period within which such tax is last payable without penalty, it may not be recovered as a preference, regardless of its traceability. Id. at 1115. Only where the tax payment is past due, Drabkin continued, is tracing necessary to avoid recovery of the payment as a preference. This distinction raises yet another issue of fact inappropriate for resolution on summary judgment — whether the payments made to the taxing authorities were for current or past due taxes. It should be noted that neither party has submitted evidence on this issue.
For the foregoing reasons, I would reverse the summary judgment and remand for trial.