Trustee Cannot Use § 548(a)(1)(A) To Avoid Transfer Which Occurred After the Filing of the Involuntary Petition and Order For Relief
December 2, 2021, Western District of Pennsylvania – The matter refers to Defendant Community State Bank of Orbisonia’s motion to dismiss the fourth amended adversary complaint against it under Federal Rule of Civil Procedure 12(b)(6). The Plaintiffs, the Estate of BG Petroleum by and through the Chapter 7 Trustee, Lisa M. Swope and Timco, Ltd commenced the adversary proceeding in August 2019. On May 18, 2021, the Plaintiffs filed a fourth amended adversary complaint, wherein Defendant, Community State Bank of Orbisonia (“CSB”), was named a defendant in the lawsuit for the first time. The Plaintiffs asserted “fraudulent transfers,” civil conspiracy, and other claims against CSB.
The Court dismissed the adversary complaint as to the Defendant bank. The Court found that while the allegations stemmed primarily from two refinancing transactions, relief under 11 USCS § 548(a) was unavailable because the transfers occurred after the entry of an order for relief under Chapter 11 and even after the case’s conversion. The Court relied on Williams v. Mortillaro (In re Res., Recycling & Remediation, Inc.), 314 BR 62, 68 (Bankr. WD Pa. 2004), where it was ruled that a Chapter 7 trustee cannot use § 548(a)(1)(A) to avoid a transfer which occurred after the filing of the involuntary petition and order for relief. The Court further held that the Plaintiffs failed to state a claim regarding equity cash-out payments because plaintiffs were not entitled to recovery against CSB in connection with the avoidance of a transfer under 12 Pa. Cons. Stat. § 5104. The Court also concluded that no relief could not be granted under Pennsylvania’s Uniform Voidable Transactions Act (PUVTA) because the Plaintiffs relinquished any claims against certain entities related to the adversary proceeding and were no longer creditors of those entities under PUVTA.
Estate of BG Petro., LLC v. Cmty. State Bank of Orbisonia, Philippians Place, LLC (In re BG Petro., LLC), Nos. 13-70334-JAD, 19-07014-JAD, 354, 2021 Bankr. LEXIS 3286 (Bankr. W.D. Pa. Dec. 2, 2021)