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Suntuity Has No Legal Interest in Inventory Held in Debtor’s Warehouse, Alleges Empire Solar Group Trustee


October 13, 2021, District of Utah – Plaintiff Steven R. Bailey, in his capacity as the Chapter 7 Trustee of the bankruptcy estate of Debtor Empire Solar Group, LLC, through counsel of record, Ray Quinney & Nebeker P.C., brings a lawsuit against Defendant Suntuity Solar Limited Liability Company for avoidance of “unrecorded ownership interest” under Section 544 of the Bankruptcy Code. The Trustee also seeks a declaratory judgment that all inventory and equipment held in each of the Debtor’s warehouses across the United States as of the petition date is property of the bankruptcy estate according to 11 USC § 541(a). 

The Trustee further argues that Suntuity holds no legal or equitable interest in the inventory and that the estate “is the sole and exclusive owner” of the inventory. Finally, the Trustee alleges that Suntuity’s alleged interest in the inventory is subject to a bona fide dispute under 11 USC § 363(f)(4) because, after notice and hearing, the Trustee “has the authority to sell the inventory free and clear of any interests” under 11 USC § 363(f). 

Suntuity argues that since, after acquiring a majority interest in the Debtor and taking over the Debtor’s management, it “ordered and purchased about $1,400,208.03 in inventory” for the Debtor, it possesses the “ownership claim” to the inventory. 

According to the complaint, the Debtor engaged in “selling and installing residential solar energy systems” in various locations throughout the United States while Defendant Suntuity engages in “selling and installing residential and commercial solar energy systems” in multiple locations throughout the country. Allegedly, the Debtor and Suntuity entered into a series of agreements, wherein Suntuity agreed to purchase and acquire a majority interest in the Debtor. After the Debtor filed for bankruptcy, the Trustee filed a motion to sell certain assets that the Trustee contended were the estate’s property, including inventory located in the Debtor’s warehouses. Suntuity filed an objection, asserting that a substantial portion of the inventory constituted Suntuity inventory. 

In re Empire Solar Group, LLC, Case Number 21-23636. Honorable Joel T. Marker is overseeing the Debtor’s  case.