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James A. Overcash, Chap. 11 Trustee v. Carol Knisley (In re Big Drive Cattle, L.L.C.), Ch. 11, BK11-42415, A13-4040 (Mar. 30, 2015)

The debtor in this case is a feedlot set up as an LLC. The bankruptcy trustee filed a preference avoidance action against one of the LLC's members to recover payments made to him when his cattle were sold. This court initially granted summary judgment to the trustee, but on appeal the district court remanded the matter for the court to focus on the issue of whether the funds transferred were actually property of the debtor and to specifically consider the issues of bailment and constructive trust. After a trial, the bankruptcy court found that the proceeds transferred to the defendant were not held in bailment and were indeed property of the debtor. The defendant in his membership capacity had participated in granting the debtor's lender a security interest in the debtor's deposit accounts, which included the account into which the proceeds of his cattle sales were deposited and paid out to him, so his consent removed the bailment protection he might otherwise have had. The defendant did not establish an "ordinary course of business" defense, so judgment was entered in the trustee's favor.

Date: 
Monday, March 30, 2015
Judge: 
Judge Thomas L. Saladino