Elite Aerospace Seeks Turnover of its Equipment Under § 542
September 23, 2021, Central District of California – Debtor and Debtor in possession Elite Aerospace Group, Inc., (“Plaintiff”) recently preferred multiple charges against Big Shoulders Capital VI, LLC, Machinery Network Auctions, Inc. (MNAI), and Machinery Network, Inc., claiming about $4.6 million. The Plaintiff seeks damages and brings equitable subordination and violation of automatic stay claims against the Defendants.
The Plaintiff also seeks a declaratory judgment stating that the alleged property in the Tustin facility, including but not limited to the equipment, is property of the Debtor’s estate, and that Defendants may not possess, retain, sell or otherwise encumber the Debtor’s property.
The Debtor is a premier aircraft component design, engineering, and manufacturing company. As alleged in the complaint, Debtor obtained a loan from Big Shoulders and granted a security interest to Big Shoulders in the majority of its equipment. The complaint alleges that the Debtor “defaulted under the loan” and Big Shoulders “foreclosed the sale” of the Debtor’s equipment without giving notice to the Debtor.
Accordingly, the Plaintiff contends that the alleged sale was “improper” and that MNAI, (MNAI bought the equipment in the foreclosure sale) was an “insider” of Big Shoulders. The Plaintiff also claims that the Defendants knowingly and voluntarily participated in a “common scheme” to prevent Plaintiff from meaningfully participating in the alleged foreclosure sale so that Machinery Network could secure the winning bid and require Plaintiff to buy back the equipment at nearly twice the sale price with funds that the Debtor was to receive from an investor.
The Plaintiff urges the court to enter a judgment compelling each of Defendants to turn over the equipment to the Plaintiff pursuant to 11 U.S.C. § 542 of the Bankruptcy Code